Citigroup profit climbs after US revival takes off

Tim Wallace
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CITIGROUP revealed yesterday that it is benefiting from a burgeoning US economic revival, posting a sharp jump in profits as more loans are repaid.

Second quarter profits hit $4.2bn (£2.78bn) – a rise of 45 per cent on the year and 42 per cent on the quarter, driven by improving house prices pushing down the level of bad loans.

Credit losses dropped 25 per cent on the year to $2.6bn, while Citi Holdings – a block of non-core assets being run down – saw its assets fall 31 per cent to $131bn.

Loans and deposits both grew by three per cent compared with the same quarter of 2012.

Investment banking revenues shot up 21 per cent to $1bn, with debt underwriting revenues up 14 per cent to $558m and equity underwriting income up 58 per cent to $266m.

Citi’s Basel 3 core tier one capital ratio rose to an estimated 10 per cent, while its return on average common equity increased strongly from 6.5 per cent a year ago to 8.8 per cent

The bank cut another 8,000 staff on the year – a fall of three per cent to 253,000, as the lender reflects the industry’s drive to cut costs to shore up profits.

Analysts praised the healthy results.

“There weren’t any glaring negatives, in our view. From here, the biggest challenge seems to be similar to what most banks face – growing net interest income,” said Deutsche Bank’s Matt O’Connor.

“Loans were flattish and the net interest margin declined three basis points. Credit card continues to lag some peers.”

The group’s shares rose two per cent on the day to close at $51.81.